10 Best Cloud Stocks To Buy According to Short Sellers

2. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Investors  in Q2 2024: 216

Short Interest as % of  Shares Outstanding: 0.56%

Alphabet Inc. (NASDAQ:GOOGL) is the mega cap technology giant whose business is fueled by its search engine. Google’s Search is the world’s largest platform of its kind, and it enables the firm to monetize its traffic to allow businesses to publish advertisements directly on Search and on web properties that have chosen to work with it. Search’s size, as evident by its processing of 5.9 million queries per minute provides Alphabet Inc. (NASDAQ:GOOGL) with a wide competitive moat that is the industry’s envy. Additionally, its tech driven focus makes it the third biggest cloud company in the world by market share. Alphabet Inc. (NASDAQ:GOOGL)’s Google Cloud business allows those unwilling to invest in infrastructure to use its hardware for their AI processing. This includes Apple, whose Apple Intelligence is trained on Google Cloud through Google’s tensor processing units (TPUs) and leaving NVIDIA out of the equation. However, 2024 has seen threats linger on the horizon for Alphabet Inc. (NASDAQ:GOOGL), in the form of purported anti trust action by the government and AI powered search platforms.

Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter. Here is what the fund said:

“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”